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National Bank of Georgia supervisory plan — COVID-19

3 Апрель, 2020 | 2 комментариев | Размещено в банк, Грузия

The National Bank of Georgia (the “NBG”), our banking regulator, has announced that it has introduced an updated supervisory plan for the Georgian banking sector. The initiatives under the revised supervisory plan are aimed at alleviating the negative financial and economic challenges created by the global COVID-19 pandemic in Georgia. The measures, which have been introduced with immediate effect, are mainly focused on capital adequacy and liquidity initiatives that allow banks to use existing buffers to support customers in the current financially stressed circumstances, to continue normal business activities as far as possible, and to support the economy through ongoing lending operations. 

Capital adequacy initiatives:

  • Combined buffer — the conservation buffer requirement of 2.5% of risk-weighted assets reduced to 0% indefinitely;
  • Pillar 2 requirements:
    • Currency induced credit risk buffer (CICR) requirement reduced by 2/3rds indefinitely;
    • The phase-in of additional credit portfolio concentration risk buffer (HHI) and net GRAPE buffer requirements on Common Equity Tier 1 (CET1) and Tier 1 capital, planned at the end of March, 2020, has been postponed indefinitely;
    • The possibility of fully or partially releasing the remaining requirements of Pillar 2 buffers (HHI, CICR, net GRAPE), if necessary, remains open.

Liquidity initiatives:

  • Liquidity coverage ratio (LCR) requirements (for local and foreign currency, as well as total requirement) may be revisited and reduced, if necessary;
  • Mandatory reserve requirements may be revisited and reduced, if necessary;
  • Eligibility criteria for repo-eligible securities may be revisited, if necessary, to support GEL liquidity.

Other initiatives:

  • The deadline for submitting previously planned stress testing results to NBG has been postponed until the end of May, 2020;
  • NBG will not impose any monetary sanctions in case of breach of economic normatives and limits driven by external factors (e.g. reserves, exchange rate deprecation);
  • NBG on-site audits, except for ongoing anti-money laundering reviews, postponed indefinitely;
  • All new regulatory changes and requirements postponed till September, 2020, or until further communicated by NBG. This does not apply to regulations with regard to open banking, XBRL reporting and resolution framework.

During the period the banks are allowed to partially or fully use the Pillar 2 and conservation buffers, the banks must not make capital distribution in any form.

Bank of Georgia’s (the “Bank”) capital adequacy ratios, funding and liquidity positions have been strong, and remain comfortably above the Bank’s minimum regulatory requirements. As of 29 February 2020, the Bank’s liquidity coverage ratio stood at 133.9% and net stable funding ratio at 130.9%, compared to the 100% minimum required level. The CET1, Tier 1 and total capital adequacy ratios were 12.2%, 14.2% and 18.6%, respectively, comfortably in excess of the respective minimum required levels of 10.2%, 12.2% and 17.1%. Following the just announced measures, the Bank expects CET1, Tier 1 and Total Capital adequacy minimum ratio requirements of 6.9%, 8.7% and 13.3%, respectively, as of 31 March 2020.

In addition, on 2 April 2020, the Bank drew-down the second tranche of the US$107 million subordinated syndicated loan facility signed in December, 2019, in the amount of US$55 million. This is expected to be treated as a Bank Tier 2 capital instrument under the Basel III regulation upon approval of the NBG and will further improve the overall capitalisation of the Bank.

(c) Banknews

 

 

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2 комментариев to “National Bank of Georgia supervisory plan — COVID-19”

  1. admin:

    General provision relating to COVID-19

    Bank of Georgia Group PLC (the “Group”) announces that, further to our announcement on 3 April 2020, relating to the National Bank of Georgia’s (the “NBG”) updated supervisory plan for Georgian banking sector, we have now agreed with the NBG that JSC Bank of Georgia (the “Bank”) will create a general provision of GEL 400 million under the Bank’s local accounting basis, which is used for calculation of the Bank’s capital ratios. This represents approximately 3.3% of the Bank’s lending book, and the general provision is expected to be taken in the first quarter of 2020. Our understanding is that the specific quantum of the provision reflects the NBG’s current expectation of estimated credit losses on the Bank’s lending book for the whole economic cycle, given current economic expectations.

    The Group publishes its financial accounts on an International Financial Reporting Standards (IFRS) basis and, at this stage, it is too early to estimate our likely provisioning requirements on this basis. We will provide a detailed update with our first quarter of 2020 results in May.

    As we announced last week, the Bank’s capital adequacy ratios, funding and liquidity positions have been strong, and remaining comfortably above of minimum regulatory requirements. At 29 February 2020, the CET1, Tier 1 and total capital adequacy ratios were 12.2%, 14.2% and 18.6%, respectively, and following recently announced measures, the Bank expects the CET1, Tier 1 and Total Capital adequacy ratio requirements at 6.9%, 8.7% and 13.3%, respectively, as of 31 March 2020. The NBG has also stated its willingness, if necessary, to fully or partially release the remaining requirements of Pillar 2 capital buffers, and, again if necessary, to introduce initiatives to reduce liquidity requirements.

    The NBG considers the Bank’s capital ratios to be sufficiently in excess of the expected minimum capital requirements at 31 March 2020, to be able to absorb this upfront general provision whilst maintaining a sufficiently comfortable buffer over the required minimum capital ratios. This is supported by the Group’s recent track record of strong profitability, and capacity to generate high levels of internal capital.

  2. Кулеры для воды:

    In addition, despite there is no liquidity problems, the National Bank of Georgia has full capacity to provide the economy with required amount of liquid resources. To achieve this goal the National Bank of Georgia has adequate amount of foreign currency reserves, which will be increased by foreign currency inflows expected from international financial institutions in the nearest future. Whereas the local currency will be provided in the required forms and amounts determined by the economy.

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